BOTTOMLINE: Desperate times call for desperate measures. For that matter, desparate times call for desparate measures.
These times are desparate, desperate times, despite what you read in the financial pages about green shoots and financial legumes.
One thing you would certainly not – yet – have read, but Bottomline alerts you to it now, is of a certain secret Federal Government plan to introduce a marvellous new growth tax, temporarily of course.
It’s all about taxing losses. No, not tax losses – taxing losses.
You may have heard this term ‘marvellous new growth tax’ before: Malcolm Fraser described the Petrol Price Parity scheme in much the same fashion – and look how well that did.
Paul Keating and then John Howard also described the GST as a ‘marvellous new growth tax’. Look how well that did.
Taxes are described in this positive way not because they promote economic growth but because they grow their take irrespective of whether the economy improves.
But how do you find a marvellous new growth tax in a time of GFC in the wake of the FCUK up in the Northern Hemisphere? (see story panel for acronymic explanation).
How do you find a marvellous new growth tax in a time of falling prices, low interest rates, rising unemployment and massive government spending that needs to be paid off within about 80 years?
You go with the flow. That flow is downhill.
Here at Bottomline, we can reveal the super secret plan by Federal, State and Local Governments, plus a few statutory bodies and at least one airport, to tax losses instead of profits.
A hallmark of the GFC has been the massive losses most corporations have drummed up. Even those making money have massive drops in profit. Hardly enough left to tax.
Now that the secret is out, it seems bleedingly obvious. Tax losses become taxed losses.
The greater the losses, the greater the windfall. So, greater become government revenues to pay off the infrastructure spending and the tax bonuses.
Sure, moves by the Federal Government to tax losses instead of profits may be howled down as misguided and unfair by the Opposition and human rights activists including the Federation Against Retrospective Tax (FARTAX). But this is as much about attitude and building confidence in the marketplace as it is about government revenues.
The psychology is clear: businesses won’t want to make losses because of their tax liabilities.
But the government needs to strike an important balance here, or it won’t work. Tax on losses needs to be much larger than taxes on profits.
In this way, business will see the sense in making profits because losses will mean a much larger tax liability.
This is where the plan may unravel as it is believed more than half the members of Caucus want to stick to established principles of taxing profits heavily and letting companies run rampant with untaxed losses.
Another area of disagreement is the ‘grey area’ of companies that break even and, therefore, are not subject to tax on profits or losses. A retrospective ‘break even’ tax is mooted.
FARTAX has already announced it will oppose any break even tax, except in the case of a company wind-up. FARTAX is pressing for an amendment it calls the break-wind-up clause.
Is this a good idea, or are we all simply at a loss? ♦
GFC or KFC?
We are still not out of the Global Financial Crisis (GFC, as it is referred to, incessantly) yet. Things are bad, but perhaps not as bad as the International Monetary Fund thinks.
They tried unsuccessfully to re-brand the GFC as the Great Recession, but most media wouldn’t buy it. Recession doesn’t sound scary enough, compared with Depression. After all, you don’t hear of anyone going on anti-recessants.
So it doesn’t matter what size it is, Recession doesn’t sound Great, ever. Not Great-bad and certainly not Great-good.
Depression is what you have to go with, in times like these. From that point on, it’s just a matter of scale.
Perhaps they should have gone for the Not-So-Great Depression instead – the NSGD – but probably catchier would have been the Second Greatest Depression, SGD. A canned meat manufacturer apparently still has dibs on the Sub-Prime American Meltdown.
It’s all too late to upgrade the branding, now that the GFC has won its place in prime time history – which means it will be forgotten in about three months.
Be aware, though, that originally the IMF was working on its crisis branding when the situation was known in banking circles as the Known Financial Crisis. But KFC had already been taken by some old US military guy.
Similarly, in Britain, the Financial Crisis United Kingdom showed promise, but amazingly some crazed fashion label beat the IMF and the World Bank to the IP. And they just couldn’t wear it.
Or maybe the penny dropped. Pigs can’t fly, even if they happen to hold money. ♦
If you receive an email from the Department of Health telling you not to eat tinned pork because of swine flu ... ignore it ...
It’s just spam. ♦